Looking at the issues specific to estate and succession planning, the revised Consolidated Text on Successions (“TUS”) also impacts the following topics:
In light of the new article 1, paragraph 1, TUS the Tax is due on enrichment and “applies to transfers of assets and rights by succession due to death, by donation, or on a gratuitous basis, including transfers resulting from trusts and other destination clauses“. The key term is “transfer”, meaning the passage from one holder to another of a right or asset according to the Italian language dictionary.
With reference to trusts, the new article 2-bis is introduced, stating that “For trusts and other similar tools, tax is due in relation to all assets and rights transferred to the beneficiaries, provided that the settlor is a resident in the State at the time of asset separation. In the case of a non-resident settlor, tax is due only on assets and rights existing in the territory of the State transferred to the beneficiary”. The law thus incorporates current best practices, including in the normative texts the (reasonable) guidelines dictated by the ITA circulars.
A major innovation in the field of succession planning and generational hand-over, where article 3, paragraph 4-ter, TUS is completely replaced. This is a cardinal rule that, under certain conditions and following EU guidelines, facilitates the transfer of businesses and participations by cancelling the tax burden on the recipients when descendants (or spouses) are involved. It is the reference article when companies or shareholdings are transferred or trusts, according to the Hague Convention or through the will. In general terms, it is confirmed that the beneficiary is always required to commit to maintaining the received assets for more than 5 years, with the addition in some cases of the control requirement for corporate entities.
A new article, 4-bis, is dedicated to trusts and similar tools (eg. Fundations). The revised provision highlights the need to look at the “gratuitous enrichment of the beneficiaries”, consistently stating that the tax applies “at the time of transfer of assets and rights to the beneficiaries”. The Italian new rule seems to resolve some of the inconsistencies dictated by the transition to the previous regime, also in terms of exemptions, rates, and tax determination. Explicitly, here, by incorporating and clarifying the guidelines of the Administration with circular 34/E/22, the provision provides that the settlor (or the trustee in the case of a testamentary trust) may “opt for the payment of the tax on each transfer of assets or rights or on the opening of the succession“. The provision also includes a passage regarding the case where beneficiaries are not identified, introducing the criterion whereby the tax is to be calculated based on the highest rate (8%). The provision is very clear in stating that the tax paid ab initio excludes subsequent transfers to the beneficiaries from the tax. Likewise, the provision excludes any possibility of reimbursement for the tax paid by the settlor or trustee.
Of cardinal interest are the new articles 7 and 56 concerning tax determination, confirming rates and exemptions currently in force. In Italy IHT and Gift Tax, are still very law and actually at 4%, 6% and 8% in relation to the parenthood between Donor and the recipient of the Gift (or the heir). The above is applicable for trusts, looking at the beneficiary enrichment.
The reform also touches on other topics such as gifts made abroad to Italian resident beneficiaries (new article 55, paragraph 1-bis) and regarding indirect liberalities, the intervention confirms the jurisprudence of the Supreme Court by amending article 56-bis in the sense that “the assessment of liberalities other than donations and those resulting from acts of donation made abroad in favor of residents can be carried out exclusively when their existence is disclosed by statements made by the interested party in tax assessment proceedings“. Therefore, 8% rate will apply but only to the part that exceeds the exemption if provided.
The impact of the Italian Tax Reform will certainly be significant for those involved in estate and succession planning and, by fitting into the guidelines delegated by Parliament to the Government and will likely allow greater clarity and attractiveness for Italy also in order to plan wealth transfers efficiently and timely. It is not unnecessary to recall here how such transfers, also focusing on family business and HNWI in Italy (or moving to Italy), if well planned and implemented, have strong repercussions on the economic and productive environment of the country and, ultimately, on the whole community well-being.
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